{ "id": 1485060, "name": "McLeod, Commissioner of Revenues, v. Kansas City Southern Railway Company", "name_abbreviation": "McLeod v. Kansas City Southern Railway Co.", "decision_date": "1943-11-01", "docket_number": "4-7150", "first_page": "281", "last_page": "289", "citations": [ { "type": "official", "cite": "206 Ark. 281" }, { "type": "parallel", "cite": "175 S.W.2d 391" } ], "court": { "name_abbreviation": "Ark.", "id": 8808, "name": "Arkansas Supreme Court" }, "jurisdiction": { "id": 34, "name_long": "Arkansas", "name": "Ark." }, "cites_to": [ { "cite": "271 S. W. 720", "category": "reporters:state_regional", "reporter": "S.W.", "opinion_index": 0 }, { "cite": "167 Ark. 557", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1377061 ], "opinion_index": 0, "case_paths": [ "/ark/167/0557-01" ] }, { "cite": "275 S. W. 741", "category": "reporters:state_regional", "reporter": "S.W.", "opinion_index": 0 }, { "cite": "169 Ark. 473", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1374036 ], "opinion_index": 0, "case_paths": [ "/ark/169/0473-01" ] }, { "cite": "32 A. L. R. 811", "category": "reporters:specialty", "reporter": "A.L.R.", "opinion_index": 0 }, { "cite": "254 S. W. 450", "category": "reporters:state_regional", "reporter": "S.W.", "opinion_index": 0 }, { "cite": "160 Ark. 17", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 8719124 ], "opinion_index": 0, "case_paths": [ "/ark/160/0017-01" ] }, { "cite": "223 S. W. 721", "category": "reporters:state_regional", "reporter": "S.W.", "opinion_index": 1 }, { "cite": "144 Ark. 494", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1588005 ], "opinion_index": 1, "case_paths": [ "/ark/144/0494-01" ] }, { "cite": "12 S. W. 475", "category": "reporters:state_regional", "reporter": "S.W.", "opinion_index": 1 }, { "cite": "52 Ark. 234", "category": "reporters:state", "reporter": "Ark.", "case_ids": [ 1913398 ], "opinion_index": 1, "case_paths": [ "/ark/52/0234-01" ] } ], "analysis": { "cardinality": 732, "char_count": 15975, "ocr_confidence": 0.477, "pagerank": { "raw": 2.404065152535944e-07, "percentile": 0.7992168655392651 }, "sha256": "5028fdc22084ea43101d836555411f3620c51d21e0f16ea02d4466eaf539987b", "simhash": "1:a3f2fd9a99b61dea", "word_count": 2706 }, "last_updated": "2023-07-14T15:20:24.664732+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "McLeod, Commissioner of Revenues, v. Kansas City Southern Railway Company." ], "opinions": [ { "text": "Griffin Smith, Chief Justice.\nAppeal by the Commissioner of Revenues is from an order permanently enjoining that official from collecting severance taxes on gravel. Kansas City Southern\u2019s complaint admitted it was engaged in the business of a common carrier; that it owns certain lands from which gravel was severed; that severance, beginning in 1924, had continued through succeeding years, and that taxes alleged by the State to be due had not been paid. The railroad\u2019s defense, in effect, is a denial that it is engaged in the business of mining, cutting, or otherwise severing from the soil for commercial purposes natural resources as contemplated by Act 118, approved February 14, 1923, or any Amendatory Act.\nTwo issues are presented. First, in taking gravel, was appellee engaged in the business of severing a natural resource for commercial purposes? Second, if the tax is found to be due, did a letter written March 29, 1930, by the Commissioner of Revenues, addressed to the Railroad Company\u2019s attorney, have the effect of relieving from the statutory penalty?\nAct 118 of 1923 was upheld in June of the year approved. Floycl v. Miller Lumber Company, 160 Ark. 17, 254 S. W. 450, 32 A. L. R. 811. In 1925 it was again upheld, and partially construed. Miller Lumber Company v. Floyd, 169 Ark. 473, 275 S. W. 741.\nIn the first case numerous plaintiffs joined in a single suit to have the act declared unconstitutional. None of those seeking relief was engaged in the business of severing timber,-but \u201c. . . all [were] engaged in the business of manufacturing timber into lumber and other finished products, and the severance, of timber [was] an incidental step in the conduct of . . . manufacturing. \u2019 \u2019 As to some of the real property affected, the sole income was derived from the timber grown thereon, and the income could not be realized without a severance of the timber.\nThe decision in 1923 was a composite. In the second appeal Mr. Justice Hart said that in the first case four members of the Court, for different reasons, held the statute to be a tax upon persons engaged in a particular line of business, and that it was not a property tax. He then said: \u201cHaving reached the conclusion that the tax levied by the statute was a tax on business and not on property, four members of this Court for different reasons united in a decision that the tax was an occupational tax and not a property tax.\u201d There is this further comment: \u201cWhatever views the different members may entertain as to the soundness of our former decision, the four members of the Court who made it agree that the decision upholding the validity of the act as an occupation tax must be regarded as the law of the case. \u2019 \u2019\nA statement by Judge Hart, appearing on pages 479-480 of the Arkansas Report, is: \u201cThe act is very broad and comprehensive, and [the tax] is levied upon all persons engaged in severing the timber from the soil for sale or commercial purposes, regardless of the purpose for which it is done. \u2019 \u2019\nHoes the last expression, \u201cRegardless of the purpose for which it is done,\u201d save to the State the tax contended for in the instant case?\nTrue it is that the act is broad. But the issue before the Court in the two Floyd cases was whether those who owned timbered lands, or who owned timber but not the land, were required to pay for the privilege of severing in the circumstances there shown. A controlling distinction between the- Floyd cases and the appeal now before us is that in the 1923-1925 litigation the plaintiffs below were severing for the purpose of having the logs sawed at their mills and the product sold. Stated differently, the plaintiffs were engaged in the business of selling lumber made from timber they owned, but in order to effectuate the main commercial purpose it was necessary that the tree be cut. Result of 1925 decision was to find that those seeking relief were engaged in the business of severing the natural resources for commercial purposes, as distinguished from cutting for private purposes.\nThere is force in the argument that if the General Assembly had intended to permit any exceptions, as was done in respect of forest products by \u00a7 4 of Act 118, it would have expressed such intent. Gravel is not excluded. If it should be conceded the purpose was to set up a particular class and say that as to it the tax was not assessable, the fact remains that before the tax was chargeable against any producer, the one obligated must have been engaged in the business of severing natural resources. Section 3. of Act 283 provides that\u00a3 \u00a3 Every person . . . severing natural resources under the provisions of this section shall be liable to the State \u00a3for the severance tax imposed herein. . . .\u201d Section 3 amends \u00a7 4 of Act 118. We do not think it was the legislative intent, by use of the language here italicized, to change the general effect of Act 118 except administratively. Under Act 118, \u00a7 4, the producer, at the time of rendering a quarterly report, remitted to the Treasurer of State. The amendment in Act 283 required payment to the Treasurer \u201cthrough the Commissioner of Revenues.\u201d It also substituted a monthly for a quarterly period.\nSpecifically, Judge Hart\u2019s opinion in Miller v. Floyd is that the levy was not against property, but was an occupation tax. The word \u201cprivilege,\u201d as used in the Constitution, meant, said Judge Hart, that the General Assembly should have power from time to time to tax occupations for revenue \u201cwhich are privileges within the meaning of the proviso.\u201d The Judge then said that \u00a7 1 of Act 118 provided, in effect, for the levying of a privilege or license tax upon each person, firm, or corporation, called the producer, \u201cengaged in the business . . . of severing from the soil or water for commercial purposes natural resources.\u201d\nIn upholding Act 118, necessary effect of the 1925 decision was to say that severing natural resources for commercial purposes was a privilege, not a common right. It is removal of the activity from the realm of common right, and determination that it is a privilege, which renders the tax constitutional, for in Sims v. Ahrens, 167 Ark. 557, 271 S. W. 720, it was said that \u201c. . . this Court cannot consistently hold that it is within the power of the Legislature to declare and tax as privileges, for. State revenue, pursuits and occupations which are matters of. common right. \u2019 \u2019\nIt is insisted in the case at bar that the Railway Company, in using gravel to ballast and otherwise maintain its tracks, converted such natural resource into transportation, just as timber taken from its lands might be made into paper from which tickets could be .printed.\nWe are confronted with two rules of construction: one that an Act of the Legislature will be held constitutional and in other respects valid if by any reasonable theory this can he done; the other that property cannot be taxed unless the intent clearly appears. Because Act 118 and all amendments materially affecting it appear to contemplate only a tax on those engaged in the business of severing natural resources for commercial purposes, and appellee is not engaged in such business, we must hold that the Chancellor correctly restrained the Commissioner of Revenues from collecting the tax. In this view of the matter it becomes unnecessary to discuss the second question raised by appellant.\nAffirmed.\nIt is stipulated that from 1924 to date of suit 1,151,725.91 cubic yards of gravel have been removed from lands owned by the railroad and if the tax is payable, the obligation is $2,957 with 25 percent penalty. The gravel was severed from appellee\u2019s land in Sevier County, near the town of Horatio, \u201cand used in the business of the plaintiff primarily for strengthening and balancing its tracks and i\u2019oadbed in order to better serve the public in both inter- and intrastate transactions.\u201d\nException is that the tax shall not be required of the individual owner of timber \u201cwho occasionally -severs or cuts from his own premises such stocks, logs, poles or other forest products as are utilized by him in the construction or repair of his own structures or improvements, the purpose of this clause being to exempt [from the tax\u2019] such severers as utilize forest products to their own personal use and not for sale, commercial gain, or profit.\u201d\nAct 118 required those engaged in the business of severing natural resources to procure a license from the State Tax Commission, \u201cor any commission hereafter created by law.\u201d The complaint in Miller V. Floyd alleged that at that time there was no State Tax Commission, it having been abolished in 1923 and duties conferred upon the Railroad Commission.\nThe Sims-Ahrens decision was handed down January 19, 1925, preceding the Miller Lumber Company V. Floyd case October 5 of the same year.\nIn the instant case the Railway Company is a corporation, and falls within the class which may have its franchise taxed, as was the case with plaintiffs below in the Floyd v. Miller Lumber Company controversy; hence, taxation of an individual\u2019s occupation for State purposes is not involved.", "type": "majority", "author": "Griffin Smith, Chief Justice." }, { "text": "McFaddin, J.,\n(dissenting). In this case, the appellee railway company owned land in fee, and employed Peck & Son to sever the gravel from the land. The railway company then used the gravel to ballast its tracks anywhere that ballast might be needed, but entirely away from the land from which the gravel was severed. Is the railway company liable to the State of Arkansas for the severance tax on the gravel so severed? That is the question.\nThe original severance tax act was No. 118 of 1923. There have been several amendments, a few of which are Act No. 283 of 1929, Act No. 116 of 1933, and Act No. 138 of 1933. These acts, as compiled, are found in \u00a7\u00a7 13371 ff. of Pope\u2019s Digest. By \u00a7 13371, the tax was levied on any person, firm or corporation \u201cengaged in the business of mining, cutting or otherwise severing from the soil or water for commercial purposes natural resources, including . . . gravel.\u201d The majority holds that the railway company is not liable for severance tax in this case. I dissent for the two reasons which I now discuss:\nFirst: The railway company was engaged in the business of severing for commercial purposes within the purview of the act. What is the business of severing! Business, as defined by Webster\u2019s Dictionary, means more than mercantile transactions. Business means: \u2018 \u2018 quality or state of being busy; . . . that which one has to do or should do; . . . that which engages time, attention or labor.\u201d See, also, 9 C. J. 1102. Mr. Justice Battle, in Hickey v. Thompson, 52 Ark. 234, 12 S. W. 475, said: \u201cThe primary signification of the word \u2018business\u2019 is employment \u2014 \u2018that which employs time, attention and labor.\u2019 \u201d So, with \u201cbusiness\u201d defined by this court in. 1889, the Legislature could well use the word in 1923 expecting this court to give the word its primary and judicially defined meaning. \u201cThus words which have been defined by statute or which have previously been given a well-defined meaning by the courts, are presumed to have that same meaning in the statute. \u2019 \u2019 59 C. J. 101.2. So the words, \u201cengaged in the business of severing,\u201d as used in the statute \u2014 when read in the light of this court\u2019s definition of \u201cbusiness,\u201d as aforesaid\u2014 mean \u201cengaged in the time, attention or labor of-severing.\u201d Certianly the railway was so engaged even in severing gravel from its own land, for the severing required time, attention and labor.\nWhat is meant by \u201ccommercial purposes\u201d? Webster\u2019s Dictionary defines \u201ccommercial\u201d as \u201cof or pertaining ,to. commerce\u201d; and \u201ccommerce\u201d is defined as \u201cbusiness intercourse; . . . the exchange of merchandise on a large scale between different parties or communities.\u201d It seems elementary that a railroad is engaged in commerce when it sells its service to the public. The gravel severed from the land was used to make the road bed so that trains could carry commerce. Certainly the gravel was therefore used for commercial-purposes.\nSo, by simple definitions, I believe the statute means that the time, attention and labor of severing for use in commerce was the taxable act concerning the gravel of the railway company, and this taxable act occurred even though the railway company never sold the gravel to a third person, but used it on its own property.\nThe majority hold that because the railway company did not re-sell the gravel there was no severance within the meaning of the Act. Such a construction makes the ultimate disposition of the gravel the test as to whether the State\u2019s natural resources have been depleted. The purpose of the Act'was to prevent the natural resources from being severed .without a tax being paid therefor.\u2019 The severance is just as complete \u2014 the natural resources are just as despoiled \u2014 if the gravel be used by the severer, as if the gravel be sold to and used by a third party. Under the holding of the majority, a large corporation is greatly favored over'a small individual. An individual would take the gravel to some construction company for re-sale, and would thus be liable for the severance tax. But a large railroad company \u2014 by owning its own gravel pits and owning its own stone quarries and owning its own forests \u2014 could despoil the State of its natural resources in gravel, stone and timber for the purpose of building'railroads, depots and other facilities, and still would never be liable for the severance tax. I cannot believe that the Legislature ever intended to pass such an Act as the majority has construed this to be.\nSecond: The Exemption. The second reason for my dissent is because I believe the majority has failed to give any effect to the exemption clause contained in \u00a7 13374 of Pope\u2019s Digest. This clause reads: \u201cProvided, this Act shall not apply to nor shall any severance tax be required of the individual owner of timber who occasionally severs or cuts from his own premises such stocks, logs, poles or other forest products as are utilized by him in the construction or repair of his own structures or improvements, the purpose of this clause being to exempt therefrom such severers as utilize forest products to their own personal use and not for sale, commercial gain or profit.\u201d\nIt is a cardinal rule of construction of statutes that effect must be given, if possible, to the whole statute and every part thereof. 59 C. J. 995. An interpretation which gives effect to the entire statute should be selected, as against one which does not. Summers v. Cole, 144 Ark. 494, 223 S. W. 721; West\u2019s Arkansas Digest \u201cStatutes,\u201d \u00a7 206.\nThe majority\u2019s construction renders the exemption clause above quoted to be entirely useless, a mere waste of words, because under the majority\u2019s construction, everyone is exempt from severance tax as long as such severer does not sell the severed resources. If the Legislature meant what the majority has held, then why did the Legislature place in the Act an exemption clause in favor of \u201can individual owner of timber who occasionally severs or cuts from his own premises . . . forest products as are utilized by him in the construction or repair of his own structures; the purpose of this clause being to exempt therefrom such severers as utilize forest products for their own personal use . .\nIt seems clear to me that the Legislature, in exempting only severers using timber on their own lands, intended to tax all severers of any other resource except timber, even though such other resource was used on the severer\u2019s own property. The exemption clause in <\u00a7 13374 shows what the Legislature intended to exempt, and the holding of the majority rides roughshod over this exemption clause and renders it entirely nugatory.\nTherefore, for the reasons stated, I respeptfully dissent.", "type": "dissent", "author": "McFaddin, J.," } ], "attorneys": [ "Herrn Northcutt, for appellant.", "Joseph R. Brown, for appellee." ], "corrections": "", "head_matter": "McLeod, Commissioner of Revenues, v. Kansas City Southern Railway Company.\n4-7150\n175 S. W. 2d 391\nOpinion delivered November 1, 1943.\nHerrn Northcutt, for appellant.\nJoseph R. Brown, for appellee." }, "file_name": "0281-01", "first_page_order": 301, "last_page_order": 309 }